The Market Pulse Report Survey is a resource that has a variety of information that business brokers and M&A advisors regularly utilize to better understand the business landscape. The most recent survey was conducted April 1st to April 15th 2022 and had 360 broker and advisor respondents. It also marked the 40th edition of the quarterly report. The Executive Summary of the report can be accessed here https://www.ibba.org/resource-center/industry-research/
The Main Street Market
One notable fact included in the latest report is that in the Main Street market, between 70% to 80% of buyers are likely to come from within a 20-mile radius. However, with larger companies, it is common for buyers to originate from a distance of over 100 miles away or greater.
The survey also indicated there are two key “headwinds” that businesses are currently facing. These include labor shortages and supply chain issues. Not surprisingly, labor issues are currently creating problems for organic growth. Likewise, supply chain issues can cause prospective buyers to shy away from a business.
The Profile of Current Buyers
The survey also indicated that Main Street buyers not only include the “typical” first-time business buyer. These individuals are often looking for a job in the form of owning a business. Serial entrepreneurs who have made money off previous deals are also now seeking to jump back in and buy another business. The survey indicates that about one-third of buyers who purchased businesses in the $500K to $1M range are serial entrepreneurs.
Additionally, there is a great deal of money flooding into the industry. The money is mostly coming from private equity, family offices, and corporations. Feeling burned by the lack of bank credit by the 2008-2009 economic downturn, these buyers don’t want to get caught in a similar situation again.
A Seller’s Market
The survey indicates that it is currently a seller’s market and that record setting multiples have been occurring. In Q1, an impressive 97% of businesses were receiving their asking price. However, nothing lasts forever. If you’re considering selling your business, it’s a good idea to start making progress now before this trend stops benefitting sellers.
Even with the strong sales track record last quarter, it’s important to note that a fast sale is still improbable. Even in the best economic conditions, it typically takes many months to sell a business.
There are many factors currently benefiting sellers, such as low interest rates, SBA involvement, and people not wanting to work for corporations. However, it’s important not to wait for the “right moment” as often that moment never comes.
It’s always a good idea to begin taking steps to prepare for the sale of your business as soon as possible. This can make a tremendous difference toward fostering a positive final outcome.
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If you are like most business owners, you have never sold a business before and might not have a clear idea of what the process is like. We recommend preparing your business in a way that makes the sale and transition process as easy for your buyer as possible. It should come as no surprise that buyers will like the idea of an easy transition.
It will be very beneficial if you take the time in advance to evaluate the steps and think about what you can do on your end to benefit your buyer. Since you’re the expert on your business, you have unique insights into what would make the transition the most seamless for the other party. When you prepare for the sale with your buyer’s experience in mind, you will likely not only speed up the sales process, but also increase the selling price.
1. Automate Processes
Just like you may have never sold a business before, your buyer may have never bought a business before. If you can figure out how to automate as many processes as you can, it will help with their workflow and reduce the level of intimidation your buyer may be feeling about taking over.
2. Establish a Second in Command
One thing you can do is have a second in command on your staff. If there is a competent employee that your buyer can depend upon for assistance and support, that fact alone will be tremendously attractive. If you do not yet have that person in place, you might have an eye on choosing a person and preparing them for this role. Speaking of staff, you will want to make sure your entire staff is well-trained and any HR issues are resolved in advance.
3. Keep Things Consistent
As you get closer to the time you will put your business up for sale, you will want to begin to work with vendors and key customers. You will want to ensure that the supply chain and significant customers are consistent. Otherwise, this could cause major disruptions for your buyer and impede his or her success. Of course, it goes without saying that you’ll want to keep the potential sale of your business completely confidential. If customers, vendors, and even employees learn about an upcoming sale, this fact alone can lead to a chain reaction of disruptions and problems.
A business broker or M&A advisor can help in a wide variety of ways when you are getting ready to sell. They are experts in maintaining confidentiality while taking you through the sales process from start to finish. Brokerage professionals will also assess your business and inform you of any areas that could be improved to make your business more attractive to buyers.
The post 3 Ways to Make Your Business Appealing to Buyers appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Have you been thinking that business ownership is for you? Many people are committed to the idea of owning a business and work hard to pursue this goal. Of course, the path towards buying a business is indeed complicated and requires a significant investment of not only money but also time. As a result, you’ll want to ensure that you are fully committed to business ownership before beginning the process. Let’s take a look at some common reasons why individuals choose to buy a business.
Desire to Grow Your Income
Most people will say that they would like to make more money. However, keep in mind that while owning a business will likely mean you grow your income, it also requires a significant amount of work, especially in the early stages.
Research shows that the longer you own your business, the more profits you will generate. Those who have owned their business for more than a decade will typically earn more than 100K a year. Of course, owning a business always comes with a degree of financial risk, but if you do successfully run your company for a series of years, you will likely succeed financially. Just be prepared for the possibility that the first few years may not generate as much income as you had hoped.
On the positive side, owning your own business allows you to have control over your financial destiny. You have the ability to make decisions that will grow your business
Interest in Shaping Your Lifestyle
When you work for someone else’s business, the way your life is organized is dictated by the rules and regulations of the company. For example, you may want to work at home, but your job requires you to spend 40 hours a week in the office.
If you want to make key decisions that impact your day-to-day life, owning a business will be quite attractive to you. You will be able to decide not only where you work, but also how many hours you work and with whom you work. You have the power and ability to shape many aspects of not only your life, but the life of your employees as well.
You are Willing to Take on Some Risk
The personality of a typical business owner is a person who is comfortable with taking on some risks. After all, not all businesses succeed. At some level, you are always risking your time, money, and energy. Of course, this aspect will vary dramatically depending on the kind of business you acquire.
It is also important to consider that many business owners find that they are working around the clock. They simply cannot go home and forget about their job at the end of the day. In sharp contrast, they are always on call and actively thinking about their business and relevant decisions. You also may not get a paid vacation or sick days.
Guardian Life Small Business Research Institute studied the ideal personality traits for a business owner and found that successful owners are action oriented, curious, self-fulfilled, tech-savvy, and future focused. They surveyed over 1,000 small businesses to generate this data. If you resonate with these traits, it is likely you are indeed cut out to own a business.
The post Three Reasons Why You Might Want to Own a Business appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
BizBuySell is an online resource that focuses on offering unique content that specifically addresses the needs of buyers and sellers. To make this happen, BizBuySell has teamed with a range of experienced business brokers who are covering topics relevant to business owners, buyers, and sellers. For example, they feature articles that focus on how to make a business more interesting to a potential buyer. These resources help to position BizBuySell as a go-to place for a range of relevant business information.
Of course, every quarter BizBuySell publishes Insight Reports complete with interactive market data. These reports offer a comprehensive overview of trends that are essential for brokerage professionals to know about. The latest report can be accessed here. It covers important trends noted in the first quarter of the year.
Some of the changes that were noted in this important report include the following:
1. Rebounding Transactions
For Q1 2022, the Quarterly Report indicates that transactions are continuing to rebound from the slump of Q2 2020. Year over year, transactions shot up a whopping 24% and are now beginning to return to 2019 levels.
Overall, the main sector that seems to be holding back an even stronger rebound is the restaurant sector, which is still not where it was in pre-pandemic years. However, with that stated, the restaurant sector has also dramatically improved and has shot up by 42% year over year. Yet, the restaurant sector is still down 22% from Q1 2019.
2. Changing Buyer Preferences
When BizBuySell surveyed buyers as to what kind of business they wanted to buy, the numbers were eye opening. 35% of surveyed buyers responded that they were interested in the service sector, and this was followed by 15% of respondents choosing retail. Director of Sales Doug Whitmire stated, “Buyer demand seems to be leaning toward business services, self-storage, car washes, as well as advanced distribution services for manufacturers. There have been few opportunities, so buyers are flocking to them and inventory is limited.” The result of the limited inventory is record sales prices.
3. Listing Growth
In Q1 2022 listing growth has increased substantially, with service listings up 14%. While the restaurant sector is obviously still lagging, it is important to note that the Quarterly Report indicated that restaurants were experiencing a 10% growth. If the pandemic continues to recede, we could see a robust rebound in the restaurant sector.
4. A Boom in Sellers
The Q1 report also indicates that sellers, who have previously been sitting on the sidelines, are deciding that now is the time to sell. Once again there is talk of a “silver tsunami” approaching as Baby Boomers begin to sell. It is also interesting to note that many of those who are selling are doing so due to burnout. Importantly, burnout is occurring for a variety of diverse reasons, ranging from supply chain and labor issues to pandemic burnout.
Advice for Sellers
The BizBuySell team strongly advises that sellers should fix major supply chain issues before entering the market. Whitmire noted, “We try to get our clients to work with us to fix those issues before we go to market. Many times, you only have one chance with a buyer and then you lose them.” It definitely makes sense for sellers to try their best to remedy any issues that might have resulted from Covid-related circumstances. This will ensure that the sales process goes as smoothly as possible.
What if you could swap worrying about driving your business forward with relaxing in retirement? 45% of entrepreneurs report feeling stressed compared to other workers. It’s become something of a modern pipe dream, but it doesn’t have to be – provided you do the right things.
One of the wisest and most profitable things you can do is sell your small business.
Why not share your legacy with another ambitious entrepreneur and watch them carry on where you left off? If you live in the greater St. Louis region, we’ve got plenty of tips on finding a buyer.
Read on for our in-depth guide on how to sell a small business in St. Louis.
1. Know Your Worth
Before you put a price tag on your business, it is important to have your finances in order. Your books must be immaculate and ready to be looked over by accountants, lawyers, and valuation specialists. The prospective buyer will also look at your financial records to see if your business is worth their investment.
Once your finances are in order, you can calculate your business’s value. The value of your business is less about your assets and more about profitability. If your books are up to date, then it shouldn’t take long to calculate the value of your business.
The best option for calculating the value of your business is to hire a business valuation expert.
2. Find the Right Buyer
Providing intricate details of your business to serious prospective buyers is an important part of the selling process. Unfortunately, this is an opportunity for your competitors to find out information that could undermine your business. Including a non-disclosure agreement (NDA) along with your sensitive documents will prevent other business owners from posing as buyers for nefarious reasons.
Many business owners allow prospective buyers to view sensitive documents on their premises to avoid them falling into the wrong hands. Gather a shortlist of buyers so that you have plenty of options if the deal falls through. Allow some room for negotiation and keep in touch with potential buyers to build a relationship.
3. Have a Solid Plan
Every business owner should have an exit strategy in place for when they want to sell. The details of your plan will depend on your personal and business circumstances.
Are you selling to family or friends? Your employees may also show interest in buying the business. Make sure that you get everything in writing and keep the transaction as professional as possible.
Your plans should also include details of how the new business owner will take over the business to ensure a smooth transition. This may include information about equipment, location, and competition so that your successor can continue to make a profit. A business that is growing will sell quickly to investors who are looking to take advantage of your success.
A business broker could help you formulate a plan for selling your business. You can concentrate on running your business while the broker takes care of the sales process. They can also help to increase your business value before you agree on a sale.
4. Consider Your Options
Depending on your goals for the business, there are lots of options for you to consider. Selling to someone you know can reduce the business transition risk because they have prior knowledge and understanding of your business. Some of the options for selling include:
- Management or employee buy-out
- Sell to a third party (individual or company)
- Partial recapitalization
Be clear about why you are selling and how you will support yourself in the future once your business has sold. Planning your future is an important part of the sales process to avoid any remorse after the transaction is complete.
You can choose to sell your business with or without a business broker. If you have the knowledge and tools to complete the process without professional help, then this is a viable option. You’ll get to keep the money from the sale and will earn more than if you hired experts to help you.
5. Get Professional Help
Enlisting the help of a business broker and pre-qualified valuation expert could make the sale of your business easier and more profitable. Selling a business can be stressful and time-consuming. With the help of a professional business broker, you can get the best deal possible for your business.
A business broker could also help you identify the best time to sell your business. It makes sense to sell your business when profits are high. A business with falling sales is less desirable to a potential buyer.
It is important to note that there are risks to selling your business without a business broker or legal team. You may cheat yourself out of potential profits by skipping a business valuation. A broker could negotiate a better deal for your business that will cover the costs of their fees.
Your team could also include an accountant, financial advisor, and lawyer to help guide you through the process of selling your business.
Learn More About How to Sell a Small Business
Learning how to sell a small business can be overwhelming without the right help on your side. After years of building your business, it can be difficult to let go of what you have built. With these helpful tips, you can start formulating your exit strategy and sell your business with minimal stress.
Are you ready to sell your business? Contact Fusion Business Services for expert advice and support on how to sell your small business.Read More